Employment law / social security

The results of an investigation into the effectiveness of the 30% facility were published in an evaluation report which was sent to Parliament last week for further discussions.

To refresh your memory: what is the 30% facility?

The 30% facility is an attractive tax regime for foreign employees working in the Netherlands. Employees can receive a tax free allowance equivalent to 30% of their remuneration to cover extra expenses incurred by working temporarily outside of their home country, irrespective of the ‘extraterritorial’ expenses actually made.

The Dutch Ministry of Finance requested an investigation be carried out into the effectiveness of the 30% facility, which resulted in the evaluation report which was sent to Parliament last week.

Conclusions evaluation report

The investigation resulted in among others the following conclusions:

  • The 30% facility has proven to be effective on all fronts: there are more specialists available in the Dutch labour market, the Netherlands has become increasingly attractive for foreign companies, and the administrative burden has been reduced; and
  • A 30% tax free allowance for extraterritorial expenses is not entirely sufficient for those employees earning a low income or coming from less prosperous countries. For high-earners coming from prosperous countries the fixed tax free allowance of 30% is too high.

Recommendations evaluation report

Fortunately, the report does not recommend the 30% facility be abolished. It does, however, put forward several suggestions to make the ruling more effective:

  • the term should be reduced from eight years to five or six years;
  • the 150 km-limit should be increased; and
  • the fixed 30% allowance should be reduced for employment incomes above a certain level.

Our recommendation to employers

Although this report and the future of the 30% facility will only be discussed in Parliament once a new government is in place it is important to be aware of possible – negative - changes in this regard, when negotiating employment contracts with new candidates from abroad.